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With NHS budgets under pressure and medicine prices inexorably going up, something had to give.

Nevertheless, the decision by some of the world’s largest pharmaceutical firms this summer to challenge public sector powers to limit drug bills in the High Court still raised eyebrows.

The action brought by trade body the Association of the British Pharmaceutical Industry (ABPI) divided the sector, with Britain’s two largest drug makers, FTSE 100 giants GlaxoSmithKline and AstraZeneca, distancing themselves from a move driven by overseas conglomerates.

At a time when the Government has been working to boost the £63bn life sciences sector, legal action was seen by some in the industry as reckless. For them, the backdrop of Brexit and the sector’s special pleading for continued close integration between the UK’s medicines regulation and the EU’s compounded the miscalculation.

However, the bitterness between industry and the NHS became all too apparent yesterday, as court papers seen by The Sunday Telegraph revealed the NHS had attacked the drug makers’ claims as “unarguable” and “makeweight”. The dispute surrounds powers given to the NHS that allow it to ration medicines that are expected to cost more than £20m in any of their first three years of use. Previously they would have been automatically funded if approved by health costs agency Nice. Drug firms argue cutting-edge treatments, including gene and immune system boosting therapies, justify high prices.

Drug firms and the NHS are currently embroiled in a High Court battle over drug prices

As medicines become ever more complex and costly to develop, the tensions exposed by the judicial review are only likely to increase.

In the United States, a separate development illustrates why some multinational drug firms feel strongly enough to take the significant reputational risk of taking the NHS to court. Swiss giant Novartis, working with British biotech group Oxford BioMedica, won US approval a fortnight ago for Kymriah, a landmark gene therapy for a form of leukaemia. The blood cancer most commonly affects children and teenagers.

It was the first so-called “CAR-T” treatment to get the green light. Such therapies work by modifying a patient’s cells to detect and attack cancer, and it was hailed as ushering in a new era of cancer treatments.

It will be prescribed to patients with relapsed acute lymphoblastic leukaemia (ALL), who would otherwise have a poor chance of survival. In clinical trials patients that received Kymriah had a 79pc chance of surviving at least a year.

Novartis priced Kymriah at $475,000 (£356,000), making it one of the world’s most expensive medicines. The drugs giant says its expense is justified due to its dramatic clinical benefit, one-time use and $1bn-plus development costs. Its price also undershot expectations, as analysts had forecast the price could be as high as $700,000. The Swiss firm has not yet submitted Kymriah for approval in the UK. But it is perhaps no coincidence Novartis is the only ABPI member so far to publicly back the court action. Novartis has said the NHS’s new drug pricing powers could delay “game changer” medicines, including several it plans to launch in Britain for cancer and cardiovascular diseases over the next five years.

Next generation treatments, including genetic therapies, are very costlyCredit:
Firstsignal

The ABPI argues the changes will limit patients’ access to cutting-edge therapies, particularly for rare diseases – the NHS and Nice counter this won’t happen providing they have sufficient proven health benefits. The new powers proved divisive among patient groups in a consultation prior to their implementation, with some such as Prostate UK saying they were “very concerned” about their potential impact. The ABPI said the claim was “the right thing to do” given the “exceptional circumstances”. NHS England and Nice have so far declined to comment on the judicial review. On the general issue of giving patients access to next-generation medicines, however, Nice is adamant it is being “proactive” in engaging with drug makers.

Dr Nick Crabb, Nice’s programme director for scientific affairs, points out it ran the first of a series of workshops on pricing and access to regenerative medicine, the catch-all term for the new wave of treatments, this summer. Yet he does not downplay the challenge.

“Where you have products with a high price and high uncertainty of patient benefits long-term, but the evidence suggests quite substantial benefits, it is quite a challenge for organisations that allocate public resources,” he says. The agency is considering extending the use of long-term and outcomes-based payments, for instance where the high cost of a medicine is split into annual payments and made only if the patient is seeing maintained health benefits.

Dr Crabb, despite the evident tensions between industry and public health bodies, is “optimistic” solutions can be found. “Sustainable healthcare is a really massive issue not just for the NHS but for most healthcare systems globally,” he says.

“We have to try really hard across the whole system to facilitate access to treatments that look transformative.”

The Cancer Drugs Fund, a £1bn-plus pot of money first announced by David Cameron for accelerating patient access to new treatments, offers a cautionary tale when it comes to rushing through medicines.

A major analysis by King’s College London and the London School of Hygiene and Tropical Medicine earlier this year found just one in five of the treatments offered through the fund over a six-year period were capable of benefiting patients, and more than half had not undergone adequate clinical trials before being used. Last summer the fund was pared back and placed under Nice control.

There is some evidence the NHS already pays too much for medicines. A study by health economists at the University of York two years ago concluded Nice’s existing thresholds for gauging the cost-effectiveness of new drugs were already too high and it needed to get better value.

Analysts believe that Nice and the NHS are likely to continue to drive a hard bargain from drug makers.

“It will be difficult to get expensive drugs approved if they don’t have a health-economic rational – and Nice is particularly strict on this,” Julie Simmonds of Panmure says. “It’s all about being able to justify prices on the basis of future NHS cost savings.”

Mick Cooper of Trinity Delta agrees: “The big issue is that many of these new treatments will need a large upfront payment, with the benefits to the country felt over the subsequent years or decades. So it would make sense for a number of these treatments to be funded from a purely economic perspective. However, it would put greater pressure on healthcare budgets.”

Analysts expect Nice to be comfortable with a high price for Novartis’s Kymriah for ALL, given the likely long-term benefits for young patients. But negotiations could be harder for expensive drugs for older patients given the way Nice does its cost-benefit calculations, which favour longer-term benefits.

Anyone hoping the coming High Court battle between the drugs industry and the NHS and Nice might put an end to the matter is likely to be disappointed.